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Red Teaming Crisis Economics

A few months ago, I broke from the site’s focus on national security and posted a short opinion piece arguing that policy makers should red team our national economic strategy. I wasn’t entirely satisfied with the original piece, so I wrote a new one. Now it would seem that events have overtaken the new piece; the administration recently announced that the recession is easing. Perhaps the immediate crisis has passed, and if so, perhaps the need to red team crisis-driven economic decisions has likewise passed.
      I wish that were true, but I doubt it is. A very rough analogy should help express my unease.
      Let’s say I’m a consumer, and I’m sinking in debt. I can’t meet my minimum payments, but I somehow manage to open a new line of credit. I use this new credit to pay the interest on my existing debt. When I tap out the new credit, I manage to open another line of credit, and so on.
      All the while I hope that my income catches up with my snowballing debt. If it does, I’ll begin to pay down the principal. If it doesn’t, I’ve at best merely postponed the inevitable.
      As a nation, we’ve taken out an unprecedented line of credit. If you accept the prevailing view, you believe this move represented a necessary response to an unacceptable risk. We’d arrived at a tipping point, and the fulcrum was a cliff’s edge. The decision to act quickly—with little or no real debate—was in fact an example of exceptional foresight and will.
      I sincerely hope you’re right.
      But what if you’re wrong? What if we’ve simply compounded the crisis? Then sooner or later we’ll face another, deeper economic crisis, and the need for good red teaming will only have grown.
      With that in mind, I offer my second short piece on red teaming crisis economics:

      Red teaming is the practice of viewing a problem from an alternative or unconventional perspective. In many cases, a red teamer will adopt an opponent’s point of view. In other cases, he or she will simply serve as a devil’s advocate to challenge assumptions and identify previously undetected risks. Militaries red team, and so do many businesses.
      Why? Good red teaming improves decisions. It discourages decision makers from justifying their choices by considering only favorable or confirming evidence. It encourages them to adopt a long-term view that incorporates second-order and systemic costs. It promotes sensible and balanced analysis by injecting contrarian points of view in a structured and non-confrontational manner. In short, it keeps decision making honest.
      Red teaming and devil’s advocacy are particularly useful during periods of crisis when the potential consequences of failure are grave. During a crisis, decision makers tend to reach first for a preferred course of action. Panic shoves aside prudence and foresight. Horizons shorten, and debate is cut short.
      “There’s no time for debate,” the crisis decision maker will assert; “we must act now!”
      This may be true of house fires, sinking ships, and snake bites, but it’s imprudent when addressing national economic policy. First, the cause-and-effect cycle is delayed. Policies implemented yesterday affect our current state, while policies implemented today affect tomorrow’s state. Even the proponents of stimulus economics admit that the hoped-for effects will emerge only over time. Second, the cause-and-effect cycle in the global economy is more complex than most academics, officials, and policy makers care to admit, at least publicly. Complexity on this scale demands a degree of understanding we typically lack, and in systems of similar complexity, policy makers’ interventions bite them back as often as not.
      Both of these conditions argue for reasoned, not rushed, decision making. They argue further for openness, prudence, and even humility—qualities good red teaming represents and fosters.
      So, how can we best apply red teaming to help promote sound economic policy?
      First, we must acknowledge the need. If you know you’re right, you won’t call for a red team. If you think you might be wrong but don’t want to admit it (or you simply don’t want to know), you won’t call for a red team. Red teaming requires moral courage. To call for a red team in today’s environment, you’d have to break from the safety of the herd and admit some degree of doubt in current policies and methods.
      Second, we must invite alternative perspectives to the public table. Has the market failed us? How do we know? Many well-credentialed economists believe that our decades-long, interventionist monetary policy is the real culprit. These economists should be invited to participate in the national policy debate as part of an economics red team. Allow them to challenge entrenched models and policies on the national stage. Give them a voice. Fashion a conversation in which policy makers are obligated to defend their strategies.
      Third, we must encourage a strong ethos of red teaming in both the American people and the journalists who serve them. Today, most Americans trust the Keynesian economic model simply because they know no better. In fact, most Americans (journalists included) probably lack even that knowledge—they simply trust things as they are. As a result, public discourse is characterized by eye-catching or sensational trivialities (“ten million dollars spent on what?!”) while the theoretical and practical roots of our policy—the portions we should question most thoughtfully—remain largely unexamined. We used to count on journalists to help us perform this function, but with some notable exceptions, they just don’t seem to be willing to ask the tough questions anymore.
      When policy makers tell us that there’s no more time or need for further questions, that is when we must question them most vigorously. It will be a shame if we look back years from now and realize that we could have avoided catastrophe if only we’d asked more questions. And that’s precisely what red teamers do.